Year: 2023
Home2023

Year: 2023

Polish Local Minimum Income Tax

Minimum Corporate Income Tax

Starting January 1, 2024, the provisions for the minimum corporate income tax will be reinstated.

The 10% minimum tax will be applicable to companies with Polish tax residency and domestic tax capital groups under specific conditions within the tax year:

  • Incurring a loss from a source of income other than capital gains, or
  • Achieving less than 2% of profit concerning non-capital gains income from a source other than capital gains to the respective profit.

Special rules are outlined in tax regulations for determining the loss concerning minimum tax, implying that an accounting loss doesn’t automatically result in minimum taxation.

It’s crucial to note that tax simulations conducted a few years back might not align with the rules changed from January 1, 2023. With this amendment, the calculation methods for loss and profitability levels have been revised, and the range of entities exempted from minimum taxation has expanded.

For taxpayers operating with a tax year different from the calendar year, the minimum tax provisions will come into effect from the tax year starting after December 31, 2023.

Tax Base

The tax base, in essence, amounts to 1.5% of income from operational activities, considering exclusions and deductions, with a critical emphasis on accurately identifying related parties and their transactions.

Which Entities are Affected?

The minimum tax may impact companies in sectors facing low profitability or temporary losses, such as:

  • HORECA
  • Transport
  • Real estate
  • Manufacturing
  • Processing
  • Wholesale and retail trade

Whether a loss or profit below 2% adheres to the arm’s length principle is inconsequential.

Tax Lawyer in Warsaw

If you’re seeking a tax lawyer in Warsaw, our law firm is well-equipped to assist. Poland’s tax landscape is constantly evolving, especially concerning both local and cross-border regulations, posing significant challenges for businesses and individuals alike. Lately, tax authorities have ramped up investigations, increasing their complexity and frequency, signaling a continued enforcement trend.

Navigating this requires a multi-faceted approach and precise tax adjustments to optimize effectiveness. At Bernard Łukomski’s firm, we possess comprehensive expertise in national and international tax laws. We offer counsel on personal and corporate income taxes, VAT, excise duty, transfer tax, stamp duty, real estate tax, tax disputes, social security, and fiscal criminal law.

Our services extend to managing tax control and litigation cases, encompassing challenges to tax liability decisions and interactions with tax authorities, administrative courts, and the Supreme Administrative Court. Getting sound tax advice not only minimizes transaction costs but also averts severe penalties and repercussions.

Email / Tel

bernard.lukomski@kpbl.pl

+48 608 093 541 (Mobile)

+48 692 802 229 (WhatsApp)

Transfer tax: changes in purchase of real properties

As of August 31, 2023, there is no longer a transfer tax (abbreviated as PCC in Polish) on the purchase of a first home on the second-hand housing market. Typically, the transfer tax for civil law transactions is 2 percent of the real property price, and in the case of a sales contract, it is paid by the buyer. This relief now exempts the purchase of a second-hand home from this transfer tax.

Under the new regulations, the acquisition of the following is also exempt from transfer tax:

The ownership of a separate flat

The ownership of a single-family residential building

The cooperative member’s ownership of a residential property, either a flat or a single-family residential building.

These new regulations apply exclusively to individuals who did not previously possess the aforementioned rights, or had a share in these rights that was 50 percent or less, unless it was inherited.

Changes for Investors:

Starting from January 1, 2024, there will be changes for individuals investing in real property. Specifically, the tax rate on a contract for the sale of the sixth flat (or subsequent flats) in the same building(s), or an interest in such a flat, with the same buyer, will be 6 percent. This applies when the buyer:

Acquires at least six flats that are separate real properties in one or more buildings on the same land, subject to VAT, or shares in such flats

Has already purchased at least five such flats or shares in them.

Consequently, the purchase of the sixth flat (and each subsequent one) will incur a double tax – both VAT and a transfer tax of 6 percent.

Real Estate And Construction Law

Our services encompass a wide range of real estate transactions and legal matters, including:

  • Assisting investors in buying and selling real estate properties.
  • Providing representation for landlords and tenants in lease agreements, as well as sale-and-lease back transactions.
  • Representing developers in both commercial and residential projects.
  • Arranging and overseeing due diligence reviews.
  • Advocating for clients in proceedings to secure permits and administrative decisions during the construction process.
  • Offering guidance in structuring and financing documents for diverse investment projects.
  • Advising on and defending against restitution claims.
  • Providing counsel on the corporate aspects of all transactions.
  • Offering expertise in construction issues, both contentious and non-contentious, along with matters related to land use, planning, permitting, and environmental concerns.
  • Crafting and negotiating various agreements and documentation essential for the investment or construction process.

PEPP – pan-European Personal Pension Product

The pan-European Personal Pension Product, known as PEPP, officially became law on September 26, 2023. PEPP is a European pension plan designed to offer supplementary income in addition to both the state pension and its associated support structures.

Who is Eligible?

Any individual residing within the EU can take advantage of PEPP, regardless of their employment status. This includes individuals who are unemployed, on maternity leave, or currently enrolled as students. Participation is voluntary, allowing anyone to join and contribute funds, up to an annual limit set at three times the average monthly salary in the national economy per year.

Portability Across the Union

PEPP is portable across the entire European Union. This means that individuals who change their place of residence within the EU can continue to contribute to the PEPP account they originally opened in their previous country of residence. Simultaneously, these individuals retain all the benefits associated with ongoing investments in the same product. It’s important to note that only one saver can accumulate savings in a PEPP account, preventing the option of opening a joint PEPP sub-account, such as for spouses.

PEPP Providers

PEPP will be offered in all EU member countries by financial entities authorized to create and distribute PEPPs. These providers may include institutions such as credit entities, insurance firms, pension companies, and investment firms. Any provider wishing to offer a PEPP must undergo a registration process. Once registered, the product can be made available and distributed throughout the EU.

Tax Advantages

PEPP savers will be exempt from personal income tax under specific conditions. This exemption is available to those who:

Do not withdraw their accumulated savings until they reach the age of 60.

Become eligible for retirement, are at least 55 years old, and have been PEPP savers for a minimum of five years.

Have contributed more than half the value of their PEPP contributions no later than five years before their withdrawal request.

Tax Lawyer – Poland

The law firm of Bernard Łukomski has in-depth knowledge and expertise in national and international tax laws and we advise our clients in all aspects of personal and corporate income taxes, VAT, excise duty, transfer tax, stamp duty, real estate tax, tax disputes, social security, and fiscal criminal law. We can help you to manage tax control cases in addition to managing tax litigation cases including challenging tax liability decisions and dealing with tax authorities, tax administrative courts and the Supreme Administrative Court. Receiving the correct tax advice often reduces transaction costs and can avert serious penalties and consequences.

Artificial Intelligence and the Law

The surge in interest surrounding the implementation of artificial intelligence (AI) solutions to enhance efficiency and gain a competitive edge is the latest trend. However, concerns about legal compliance, particularly in light of pending EU regulations addressing AI, are of utmost importance.

Artificial Intelligence Regulatory Landscape

Currently, there exists no universally applicable legislation imposing specific obligations related to AI. However, this is expected to change in the near future. The finalization of the core act, known as the “Artificial Intelligence Act,” which establishes standardized rules on AI, is scheduled for later this year. The Commission, Parliament, and Council are currently engaged in negotiations to determine the final wording of this act. It will primarily impose obligations on both AI system providers and entities using AI systems under their control.

The Artificial Intelligence Act aims to establish a legal framework for the development and deployment of AI systems within the EU. Its primary objective is to ensure that AI technologies are employed in a manner that is transparent, accountable, and respects fundamental rights and values.

Common Concerns about Artificial Intelligence

In addition to regulations specific to AI, it is crucial to analyse AI usage within the framework of existing legislation. Frequently raised questions include:

  • Determining ownership rights over AI-generated outputs (completions) and establishing usage protocols, including the consequences of integrating such outputs with the client’s proprietary solutions.
  • Allocating liability for intellectual property infringements resulting from the use of AI solutions and completions/materials generated by generative AI (e.g., identifying the entity responsible for copyright claims when third-party materials were used in training models).
  • Addressing potential access by the AI system provider to data inputted into the model, particularly during content analysis and filtering to ensure proper usage.
  • Utilising client data for further training of the provider’s models.
  • Ensuring compliance with GDPR, especially in terms of upholding data subject rights and implementing requirements related to automated data processing (including profiling), as well as addressing issues of inaccurate personal data generated by AI solutions.

Solutions to these concerns can primarily be found within the contract with the AI system provider and technical documentation detailing data flow or service configuration options.

Furthermore, evaluating necessary adjustments within the client’s organisational structure is crucial to ensure lawful AI usage and mitigate solution-specific risks (e.g., over-reliance on AI systems or potential misinterpretations by AI solutions). These efforts often involve formulating appropriate usage policies for AI, updating data protection documentation, and implementing protocols for human oversight of AI-generated content.

When identifying legal risks and their solutions, it is worth remembering that there are considerable differences not only between different versions of AI solutions but – most importantly – between AI service providers, especially regarding the ways in which they regulate the above issues in their contracts or in the architecture of their services. The situation in this area is often very dynamic – for example, recently Microsoft published the Microsoft Copilot Copyright Commitment which states that, starting October 1st, Microsoft will extend existing contractual liability rules for intellectual property infringement with regard to commercial Copilot services and Bing Chat Enterprise. As a result of the above, Microsoft will defend the customer and pay any amounts awarded in adverse judgments/settlements in the event that the client is sued by a third party for infringement of intellectual property rights through the use of Copilot services or the generated responses (excluding trademarks). To benefit from the above, it is necessary to use the protections and content filters built into the services by Microsoft and not to use the services intentionally to create infringing materials. The obligation to defend against claims related to the use of AI-generated content by AI systems is undoubtedly an important change in the approach to the client, and may facilitate any decision regarding using AI.

Implementing AI is already possible Despite many valid points regarding the risks of using AI, what is common for new technologies, it should not be assumed, without further analysis, that implementing such systems in an organization is currently not possible, particularly given the still-ongoing work on the AI Act. The regulations which are in force in Poland do not generally prohibit the use of such solutions. However, it is important to approach this topic thoroughly, including by properly defining the rights and obligations of the user and the AI solution provider, defining the ways in which AI solutions can be used in the organization as well as adjusting internal procedures. Many entities are already using this technology in their daily work, showing many interesting applications of AI (e.g. efficient document review, performing summaries and analysis of large amounts of text) and how many further benefits it can bring.

Housing affordability: What Can an Average Salary Buy in Terms of Square Meters of Housing in Poland?

Examining Housing Affordability in Poland’s Largest Cities

In the realm of housing demand and affordability, Poland mirrors global concerns. A recent study by RynekPierwotny.pl delved into the housing markets of the ten largest Polish cities, gauging how many square meters of real estate an average salary can secure. The findings, listed in ascending order of affordability, are as follows:

Source information – Click here.

Katowice—0.87 square meters.

Bydgoszcz—0.77 square meters.

Poznan—0.72 square meters.

Gdańsk—0.72 square meters.

Łódź—0.69 square meters.

Lublin—0.68 square meters.

Kraków—0.66 square meters.

Wrocław—0.66 square meters.

Szczecin—0.63 square meters.

Warsaw—0.59 square meters.

A stark disparity emerges, with Warsaw standing as the least accessible city to purchase a home. Here, only 0.59 square meters of residential real estate can be acquired for an average salary.

High earnings

Interestingly, high earnings don’t always align with elevated housing prices. Katowice serves as an example, where earnings are relatively high, yet housing costs remain modest. Conversely, Szczecin presents the inverse scenario, with lower wages but real estate options tailored towards wealthier clientele.

Of note are Gdańsk and Bydgoszcz, shining in terms of housing affordability, boasting 23 properties per thousand inhabitants. In contrast, Szczecin faces a less favorable situation, offering only 12 properties per thousand residents.

Keeping an eye on the housing market reveals intriguing shifts. Over the past year, Katowice, Lublin, and Łódź saw a notable surge in real estate options, with increases of 34%, 17%, and 5%, respectively. Conversely, cities like Warsaw, Kraków, Gdańsk, and Poznań witnessed a decline in available housing opportunities.

Real Estate And Construction Law

Our experience in real estate and construction law matters includes:

  • Representing investors with the purchase and sale of real estate;
  • Representing landlords and tenants in lease and sale-and-lease back real estate transactions;
  • Representing developers in commercial and residential projects;
  • Organizing and conducting due diligence reviews;
  • Representing clients in proceedings to obtain permits and administrative decisions in the construction process;
  • Advising in connection with the development of structure and finance documents under various investment projects;
  • Advising on and defending against restitution claims;
  • Advising on corporate aspects of all transactions;
  • Advising on construction issues (contentious and non-contentious), land use, planning, permitting and environmental issues;
  • Drafting and negotiating agreements and other documentation required in the investment or construction process.

As it is very important that every transaction, investment project or any other decision we make is tax efficient and tax secure we also advise our clients on taxation of numerous real estate transactions (e.g. purchase / sale of land real estate & building real estate).

Demographic Struggles: Poland Anticipates Significant Population Decline by 2060

Poland, much like numerous other nations, grapples with significant demographic hurdles. According to projections from the Central Statistical Office of Poland, the country’s population could dwindle by nearly a third, reaching 27 million people by 2060. Let’s delve into the factors influencing this process.

Present Demographic Landscape

As of the close of the previous year, Poland was home to 37.7 million inhabitants. Projections suggest that by 2060, the population may diminish by anywhere from 8% to 29%, contingent on the scenario.

Diminishing Birth Rate

Between the onset of this year and June 2023, Poland welcomed 139.5 thousand new-borns, marking the lowest count since the conclusion of World War II. Experts foresee further deterioration. Under the pessimistic scenario, by 2060, the count of new-borns might plummet by half, totalling just around 152 thousand.

The dwindling fertility rate also influences the demographic panorama. In 2022, the rate stood at 1.26, and forecasts indicate it could decline to 1.19. Notably, these figures fail to meet even the minimal criteria for straightforward generational succession, necessitating a coefficient of 2.1.

Effects of Abortion Legislation

The reduction in the count of women within reproductive age groups adds to this predicament. In recent years, shifts in Polish legal frameworks, notably the tightening of abortion regulations, have negatively impacted the demographic scenario. These changes may impede family planning and heighten the risk of clandestine procedures.

The Role of Immigration

To counterbalance population decline and sustain economic vitality, Poland must actively allure immigrants. As of June 2023, the nation boasted over a million foreign laborers, primarily hailing from Ukraine. However, competition with neighbouring nations like the Czech Republic, Slovakia, and Germany could exacerbate the situation, potentially diminishing Poland’s appeal to prospective immigrants.

Aging Population

With a reduction in the number of working-age citizens and an upswing in retirees, Poland confronts substantial challenges in the realms of healthcare and social security. The count of individuals aged 65 and above could surge by over 80%, placing substantial strain on healthcare and pension systems.

By 2022, for every 100 working-age individuals, there were 70 who were not in the workforce. However, according to the “medium” scenario, by 2060, the ratio could skew towards 105 working-age individuals for every 100 non-working individuals.

Poland Implements Reduced Rates for Late Payment Interest

Late payment interest

On September 15, 2023, Poland released an Announcement from the Ministry of Finance regarding the interest rates for tax arrears and late payments. This announcement includes the following reductions in interest rates:

Source information: https://www.dziennikustaw.gov.pl/MP/2023/1017

Late payment interest rates

The standard rate has been lowered from 16.5% to 15.0% per annum.

The reduced rate has been decreased from 8.25% to 7.50% per annum.

The increased rate has been brought down from 24.75% to 22.50% per annum.

Reduced rate

The reduced rate is applicable when a taxpayer initiates self-correction prior to receiving a notice of procedures for an amended assessment, and the payment is made within 7 days of filing the corrected return. Conversely, the increased rate is enforced for VAT and customs duties, including situations where a taxpayer understates their tax liability, overstates an overpayment or refund claim, or neglects to file a return and pay tax, and this is discovered during tax control proceedings.

For further information about late payment interest or any other tax matters, please contact Bernard.

Tax Lawyer Poland

If you are looking for a tax lawyer in Warsaw, our law firm can help you. The tax landscape in Poland is forever evolving, particularly when dealing with cross-border and local tax regulations and this presents businesses and individuals with a significant challenge. Recently, there has been a noticeable increase in the number and complexity of tax investigations conducted by authorities and it is expected that enforcement will continue to gather pace.

The requirement for tax adjustments and a multi-disciplinary approach to maximise tax effectiveness is rising accordingly. The law firm of Bernard Łukomski has in-depth knowledge and expertise in national and international tax laws and we advise our clients in all aspects of personal and corporate income taxes, VAT, excise duty, transfer tax, stamp duty, real estate tax, tax disputes, social security, and fiscal criminal law.

Email / Tel

bernard.lukomski@kpbl.pl

+48 608 093 541 (Mobile)

+48 692 802 229 (WhatsApp)

Navigating Post-Divorce Child Contact Arrangements in Poland

Child contact

Embracing a new chapter post-marriage dissolution can be intricate, especially when it comes to matters involving children. Commonly, after the bonds of matrimony fray, parents find themselves at odds over crucial child-related decisions. Setting up a coherent visitation schedule becomes a daunting task, often leading to one parent limiting the other’s interaction with the child.

In the context of divorcing couples with shared minor children, Polish courts play a pivotal role in delineating the contours of contact arrangements. The divorce decree becomes a canvas upon which the schedule of interactions between the non-custodial parent and the children is artfully painted. This court-sanctioned schedule is binding, carrying the weight of legal consequences if not adhered to.

The exception to this rule surfaces when both spouses unite in a joint request to keep child contact matters outside the divorce decree. In this scenario, the court refrains from imposing a schedule.

Child contact encompasses a gamut of interactions, spanning from maintaining correspondence to leveraging digital avenues like WhatsApp, Skype, and phone calls. Additionally, it includes physical presence in the child’s life, encompassing visits, meet-ups, and even the potential for the parent to take the child abroad as part of these interactions.

The granularity of contact arrangements is subject to variation. Some cases call for meticulously crafted schedules with fixed dates and hours for interactions, while others adopt a more fluid approach, where each interaction is individually agreed upon by the parents.

However, the court’s role isn’t solely confined to establishing a roadmap for contact. It also wields the authority to curtail or shape these interactions for the child’s best interests. These limitations may involve restrictions such as disallowing in-person meetings, preventing the child’s relocation from their permanent residence, or even mandating the presence of a guardian, probation officer, or court-appointed individual during interactions.

In extreme cases, the court can completely halt contact if it deems that the child’s well-being is at stake. Decisions surrounding contact arrangements aren’t static; they can evolve over time based on changing circumstances or new evidence.

Engaging in legal proceedings involving child contact is a nuanced journey, particularly when international elements come into play. Cases involving cross-border parental residence, potentially impacting the child’s travel, add an extra layer of complexity. In such situations, seeking guidance from a dedicated Family Law Firm in Poland becomes indispensable. These experts adeptly navigate the intricacies of court proceedings, ensuring that your requests are eloquently presented and substantiated by compelling evidence – all aligned with the child’s best interests.

Our team of experienced family lawyers stands ready to walk with you through the labyrinthine corridors of court proceedings in Poland. Don’t hesitate to reach out – we’re here to guide you toward a resolution that safeguards the well-being of your child while respecting your rights as a parent.

For further information, contact Bernard:

Email / Tel

bernard.lukomski@kpbl.pl

+48 608 093 541 (Mobile)

+48 692 802 229 (WhatsApp)

Unveiling a New Era: Navigating the Landscape of Poland’s National e-Invoice System (KSeF)

KSeF

Embarking on a revolutionary journey to reshape the landscape of VAT invoicing, Poland introduces the National e-Invoice System (KSeF). This ground-breaking initiative, initiated in January 2022, promises to redefine the issuance and receipt of VAT invoices, propelling businesses into a new era of digital efficiency. While its initial rollout was optional, the mandatory adoption of KSeF is on the horizon, slated to commence in July 2024.

In the realm of corporate operations, one of the foremost challenges enterprises confront is the construction of bespoke tools or the hunt for pre-packaged solutions that align seamlessly with the intricate compliance requirements of e-Invoicing. The intricate process of integrating these solutions with the taxation framework amplifies the complexity. The heartbeat of this challenge lies in the necessity to adhere to meticulous standards, encompassing the very fabric of document structures, along with the registration of these documents within the governmental ecosystem. This endeavour presents a formidable hurdle, especially for conglomerates dealing with an avalanche of documents awaiting transformation into the new-age format.

In the endeavour to decipher the key challenges entailed in the implementation of KSeF, we shed light on the pivotal hurdles faced by entities, accompanied by strategies and support mechanisms that pave the way for a seamless transition. Our focus lies in unravelling the essential elements that pave the path to a successful integration of the groundbreaking e-Invoice paradigm.

Charting the Course: Decoding the Path to Implementing e-Invoices

The dawn of the National e-Invoice System was heralded on January 1, 2022, as structured invoices began to flow through the digital arteries of the Ministry of Finance’s innovative ICT system, the KSeF. The initial phase allowed for voluntary participation, largely attributed to regulatory gaps and technical intricacies that required ironing out. It wasn’t until a recent legislative revision that the much-anticipated solutions, conceived through public consultation, were woven into the fabric of the system. Consequently, the deadline for making KSeF obligatory for all VAT invoices in Polish commercial transactions was extended by six months, setting the stage for a mandatory shift by July 1, 2024.

As this timeline unfurls, it’s imperative not to underestimate the scale of transformation that looms ahead. The magnitude of preparations required extends beyond the technological spectrum and delves deep into the procedural and operational facets of businesses. The labyrinthine tax implications accompanying this transition necessitate meticulous planning and meticulous execution.

The Legal Tapestry: Navigating Legal and Tax Implications

A lapse in adhering to the National e-Invoice System’s mandates can summon penalties of significant magnitude. Taxpayers breaching their obligation to utilize KSeF, issuing invoices incongruent with prescribed templates, or failing to dispatch invoices on time are susceptible to fines imposed by the tax office. These fines could range up to 100% of the tax amount indicated on an invoice issued outside the KSeF framework. Even in instances where no tax is indicated, fines up to 18.7% of the total invoice amount are not to be taken lightly. The veil of data privacy lifts as tax authorities gain unrestricted access to the data housed within KSeF, allowing for meticulous oversight.

The Vigilance of Transformation: Real-time Insights into Transactions

July 1, 2024, ushers in a new era of real-time transaction vigilance. The tax authorities’ access to granular transaction data during invoicing necessitates precision in data submission and thorough verification to align with VAT Act provisions. When coupled with data from single control files (JPK) and advanced analytical tools, the system’s potential to unearth irregularities in VAT accounting becomes an undeniable reality.

Crafting a Future of Efficiency: The Quest for the Perfect Partner

In the pursuit of a harmonious fusion between accounting and invoicing processes, the partnership between Ecovis and Pagero emerges as a beacon of seamless integration. Empowering companies to steer their invoicing operations with heightened efficiency and security, this partnership mitigates the specter of errors. By melding expertise with cutting-edge technology, the joint platform paves the way for businesses of all scales to elevate their operations through comprehensive support.

The art of selecting the right provider for e-Invoice integration rests on multiple pillars. Experience in navigating the intricacies of tax technology projects assumes paramount importance. In this realm, Pagero emerges as a veteran, having etched its presence in the market for over two decades and making its Polish debut in 2022. Boasting the world’s largest open business network, Pagero stands as a testimony to interoperability, spanning over 140 markets and facilitating seamless compliance with local regulations. It’s a platform where invoices, orders, and other e-documents harmoniously traverse structured formats underpinned by agreed-upon data scopes.

The path forward necessitates not only technological prowess but also a comprehensive grasp of business and procedural dynamics. The union between Ecovis and Pagero champions this cause, providing the scaffolding required to scale this mountainous transformation with confidence. The prowess to handle incoming invoices from international collaborators and the facility to attach documents to invoices further underline the platform’s versatility.

Embracing the Future Today: Initiating e-Invoice Exchange

Embracing the essence of automation and efficiency, the urgency of adopting e-Invoice exchange well ahead of KSeF’s mandatory timeline becomes a strategic imperative. Unveiling the potential of automation through early initiation ushers in benefits sooner than anticipated.

As Poland’s National e-Invoice System (KSeF) charts an ambitious course, the challenges it presents are matched only by the opportunities it unlocks. By choosing the right partners, seizing the mantle of automation, and navigating this transformation with poise, businesses stand to script a future that thrives on digital efficiency and compliance. The era of KSeF is here, beckoning businesses to embark on a journey of transformation and growth.

For further information, contact Bernard:

Email / Tel

bernard.lukomski@kpbl.pl

+48 608 093 541 (Mobile)

+48 692 802 229 (WhatsApp)

Bankruptcy filing obligation – COVID

As of July 1, 2023, the state of the pandemic in Poland officially ended, marking the first time since 2020. Consequently, certain regulations that were implemented to protect businesses from the economic consequences of the COVID-19 pandemic have expired. One of these regulations is the suspension of the obligation to file for bankruptcy within 30 days of insolvency, specifically for cases where insolvency was caused by the pandemic.

Therefore, members of the management boards of Polish companies that became insolvent due to the pandemic and have not yet filed for bankruptcy were required to do so by July 30, 2023. Failing to meet this deadline may result in civil, criminal, tax, and administrative liability for the managers.

In light of these developments, it is crucial for members of Polish management boards to be aware of their obligations and take appropriate actions. This has practical implications for businesses operating in Poland.

Insolvency Tests under Polish Law:

Polish Bankruptcy Law includes two separate insolvency tests:

  1. Liquidity Insolvency Test: A debtor is considered insolvent if they are unable to pay their pecuniary liabilities as they become due. This test applies to both individuals and legal entities. If the delay in payment of pecuniary liabilities exceeds three months, it is presumed that the debtor has lost the ability to pay.
  2. Balance Sheet Insolvency Test: This test applies only to corporate entities. A debtor is presumed to be insolvent if their pecuniary liabilities exceed the value of their assets for a period exceeding twenty-four months. Future liabilities and liabilities towards partners or shareholders arising from a loan within the previous five years are not included in the balance sheet liabilities.

Insolvency-Related Obligations of Managers of Polish Companies and Associated Liability:

Managers of Polish limited liability companies and simple joint-stock companies may be personally liable for the company’s debts if enforcement against the company proves ineffective. To avoid liability, managers must demonstrate that they filed for bankruptcy in a timely manner, initiated restructuring proceedings, were not at fault for a late filing, or that creditors did not suffer any damage.

Managers may also be liable for tax and social security arrears if enforcement against the company’s assets proves ineffective. Liability can be avoided if a timely bankruptcy filing was made or if the manager is not at fault for the late filing.

Criminal and quasi-criminal liability can also arise from a lack of or late bankruptcy filing, leading to penalties such as fines, limitations of liberty, or imprisonment. Furthermore, a late filing may result in a court-imposed prohibition on conducting business or being a member of the management or supervisory boards of legal entities.

COVID Bankruptcy Filing Suspension:

During the COVID-19 pandemic, specific measures were introduced in Polish law to protect businesses, including a temporary suspension of the bankruptcy filing obligation. This suspension applied to debtors who became insolvent due to the pandemic and lasted until the state of epidemic threat was lifted.

With the state of epidemic threat ending on June 30, 2023, members of management boards of insolvent Polish companies will have until July 30, 2023, to file for bankruptcy to avoid personal liability.

Considerations and Mitigating Risks for Those Conducting Business in Poland:

Given these developments, an increase in bankruptcy filings and restructuring processes is expected in Poland. While a massive wave of bankruptcies is unlikely, it is crucial to monitor the solvency status of Polish business partners, as their bankruptcy or restructuring can significantly impact commercial relationships.

Bankruptcy or restructuring processes can lead to the deprivation of management rights, court-appointed trustees or administrators overseeing business operations, and potential invalidation of contracts predating the opening of proceedings. Restructuring processes may also prevent the termination of certain agreements without the consent of the creditors’ council.

To mitigate risks, it is advisable to continuously monitor the central register of debtors, which reveals bankruptcy and restructuring motions related to entities in Poland. This allows for timely awareness of potential risks and the ability to take appropriate actions.

Overall, staying informed, conducting thorough assessments of insolvency tests, and considering available restructuring options can help mitigate risks and ensure compliance with Polish bankruptcy regulations.